Spurring Growth In Iraq’s Banking Industry

The Financial Development Project, where Keliehor works, is designed to assist Iraq in developing infrastructure and capacity of the financial sector to international standards, thus ensuring its long-term growth. By working closely with private sector stakeholders and organisations, including the United Nations and World Bank, the project advocates reforms, expands financial intermediation and provides assistance to government counterparts, such as the Central Bank of Iraq. Its parent company, USAID, has invested over $8 billion on overall reform in Iraq since March 2003, and aims to spend $174 million between 2008-13 in its Provincial Economic Growth Programme.

New Developments

Recently, Iraq Financial Development Project, in association with the Central Bank of Iraq, introduced two changes to the payments system that apparently have the potential to revolutionalise Iraq’s banking sector, while also integrating banks with the financial services sector.

The first change is the introduction of a “national switch” for processing credit card and ATM transactions. This is crucial. Currently every bank operates its own unique system for cards, and since not every point of sale is connected to every system, no one card works everywhere. It’s not a surprise then that almost everything is paid for in cash. The national switch will eliminate this problem by connecting all of Iraq’s ATM machines and credit card point-of-sale scanners to a common platform.

The second change is the establishment of the Iraq Interoperable Mobile Payments System (IIMPS), which allows people who don’t have a bank account to access a bank using their mobile phones. This step is commensurate with a unique feature of Iraq, where mobile phone users form about 80 per cent of the population. This system will permit bank account holders to conduct transactions over a phone call, removing the need to pay for anything with “blocks” of hundred dollar bills, as is the case with the local Iraqi dinar.

Keliehor too sees the future of Iraqi banking as one that moves away from the brick-and-mortar system to a mobile banking one. “Currently there is still a wait-and-watch approach towards Iraq, but by next year the political environment will be clearer, so there will be an evaluation of strategy followed by change. Till then Iraq will have a bottom-up rather than a top- down approach to banking. A slow maturity will take place in the market, starting with the introduction of prepaid cards, then debit cards and finally credit cards.”

The momentum will be slow and skeptical, he admits. “The politics and the demands of people will need to be managed to move things forward faster. But I remain bullish on the opportunity.”

The enormity of erecting a new world always remains, but as Keliehor has learnt over the years: build it and they will come.